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Estimating Marginal Returns to Medical Care: Evidence from At-Risk Newborns

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  • Douglas Almond
  • Joseph J. Doyle, Jr.
  • Amanda E. Kowalski
  • Heidi Williams

Abstract

We estimate marginal returns to medical care for at-risk newborns by comparing health outcomes and medical treatment provision on either side of common risk classifications, most notably the "very low birth weight" threshold at 1500 grams. First, using data on the census of US births in available years from 1983-2002, we find evidence that newborns with birth weights just below 1500 grams have lower one-year mortality rates than do newborns with birth weights just above this cutoff, even though mortality risk tends to decrease with birth weight. One-year mortality falls by approximately one percentage point as birth weight crosses 1500 grams from above, which is large relative to mean one-year mortality of 5.5% just above 1500 grams. Second, using hospital discharge records for births in five states in available years from 1991-2006, we find evidence that newborns with birth weights just below 1500 grams have discontinuously higher costs and frequencies of specific medical inputs. We estimate a $4,000 increase in hospital costs as birth weight approaches 1500 grams from above, relative to mean hospital costs of $40,000 just above 1500 grams. Taken together, these estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1500 grams is on the order of $550,000 in 2006 dollars.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14522.

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Date of creation: Dec 2008
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Publication status: published as Quarterly Journal of Economics, May 2010, Vol. 125, No. 2, Pages 591-634
Handle: RePEc:nbr:nberwo:14522

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  1. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
  2. David M. Cutler & Ellen Meara, 2000. "The Technology of Birth: Is It Worth It?," NBER Chapters, in: Frontiers in Health Policy Research, Volume 3, pages 33-68 National Bureau of Economic Research, Inc.
  3. McClellan, Mark & Newhouse, Joseph P., 1997. "The marginal cost-effectiveness of medical technology: A panel instrumental-variables approach," Journal of Econometrics, Elsevier, vol. 77(1), pages 39-64, March.
  4. Atsushi Inoue & Gary Solon, 2005. "Two-Sample Instrumental Variables Estimators," NBER Technical Working Papers 0311, National Bureau of Economic Research, Inc.
  5. David S. Lee & David Card, 2006. "Regression Discontinuity Inference with Specification Error," NBER Technical Working Papers 0322, National Bureau of Economic Research, Inc.
  6. Ludwig, Jens & Miller, Douglas L., 2006. "Does Head Start Improve Children's Life Chances? Evidence from a Regression Discontinuity Design," IZA Discussion Papers 2111, Institute for the Study of Labor (IZA).
  7. Kessler, Daniel & McClellan, Mark, 1996. "Do Doctors Practice Defensive Medicine?," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 353-90, May.
  8. Daniel P. Kessler & Mark McClellan, 1996. "Do Doctors Practice Defensive Medicine?," NBER Working Papers 5466, National Bureau of Economic Research, Inc.
  9. William D. Nordhaus, 2002. "The Health of Nations: The Contribution of Improved Health to Living Standards," NBER Working Papers 8818, National Bureau of Economic Research, Inc.
  10. Cutler David M. & Meara Ellen, 2000. "The Technology of Birth: Is It Worth It?," Forum for Health Economics & Policy, De Gruyter, vol. 3(1), pages 1-37, January.
  11. David M. Cutler & Mark McClellan & Joseph P. Newhouse & Dahlia Remler, 1996. "Are Medical Prices Declining?," NBER Working Papers 5750, National Bureau of Economic Research, Inc.
  12. Douglas Almond & Joseph J. Doyle, Jr., 2008. "After Midnight: A Regression Discontinuity Design in Length of Postpartum Hospital Stays," NBER Working Papers 13877, National Bureau of Economic Research, Inc.
  13. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
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Cited by:
  1. N. Meltem Daysal & Mircea Trandafir & Reyn van Ewijk, 2012. "Saving Lives at Birth: The Impact of Home Births on Infant Outcomes," Cahiers de recherche 12-11, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  2. Jason Hockenberry & Lorens Helmchen, 2014. "The Nature of Surgeon Human Capital Depreciation," NBER Working Papers 20017, National Bureau of Economic Research, Inc.
  3. Alan I. Barreca & Jason M. Lindo & Glen R. Waddell, 2011. "Heaping-Induced Bias in Regression-Discontinuity Designs," NBER Working Papers 17408, National Bureau of Economic Research, Inc.
  4. Hendrik Jürges & Juliane Köberlein, 2013. "First Do No Harm. Then Do Not Cheat: DRG Upcoding in German Neonatology," Discussion Papers of DIW Berlin 1314, DIW Berlin, German Institute for Economic Research.
  5. Will Dobbie & Roland G. Fryer, Jr, 2011. "The Impact of Youth Service on Future Outcomes: Evidence from Teach For America," NBER Working Papers 17402, National Bureau of Economic Research, Inc.
  6. Adhvaryu, Achyuta & Nyshadham, Anant, 2011. "Healthcare Choices, Information and Health Outcomes," Working Papers 88, Yale University, Department of Economics.
  7. Daysal, N. Meltem & Trandafir, Mircea & van Ewijk, Reyn, 2013. "Returns to Childbirth Technologies: Evidence from Preterm Births," IZA Discussion Papers 7834, Institute for the Study of Labor (IZA).
  8. Jonathan T. Kolstad & Amanda E. Kowalski, 2010. "The Impact of Health Care Reform On Hospital and Preventive Care: Evidence from Massachusetts," NBER Working Papers 16012, National Bureau of Economic Research, Inc.
  9. Andreas Fuster & James Vickery, 2013. "Securitization and the fixed-rate mortgage," Staff Reports 594, Federal Reserve Bank of New York.
  10. Bharadwaj, Prashant & Løken, Katrine V. & Neilson, Christopher, 2012. "Early Life Health Interventions And Academic Achievement," Working Papers in Economics 13/12, University of Bergen, Department of Economics.
  11. Fe, Eduardo, 2012. "Efficient estimation in regression discontinuity designs via asymmetric kernels," MPRA Paper 38164, University Library of Munich, Germany.
  12. Amitabh Chandra & Anupam B. Jena & Jonathan S. Skinner, 2011. "The Pragmatist's Guide to Comparative Effectiveness Research," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 27-46, Spring.

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